Texas’ State Budget for 2004-05 Implications for Health Care for Vulnerable

Texans Healthy Communities Initiative

October 29, 2003Beaumont, Texas

Anne Dunkelberg, Senior Policy Analyst (dunkelberg@cppp.org)

900 Lydia Street - Austin, Texas 78702Phone (512) 320-0222 – fax (512) 320-0227 - www.cppp.org

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Health Care for the Poor

Medicaid•August 2003: 2.47 million Texans enrolled in Medicaid. •Two-thirds of Medicaid enrollees (1.64 million) were ages 0 to 18.

Children’s Health Insurance Program (CHIP)•as of September 1, 2003 -- 507,259 children •as of October 1, 2003 -- 488,690

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Medicaid and CHIP in the 2004-05 BudgetWho is no longer eligible?

Reduced Medicaid Maternity Coverage For Low-Income Pregnant Women: Medicaid coverage is for prenatal care, delivery, and postpartum care for 60 days after delivery, including treatment of any medical condition that may complicate the pregnancy. Under current policy, Texas covers women up to 185% of the federal poverty level (FPL); HHSC projects that a total monthly average of 113,326 women would have been covered in 2005 at the current policy of 185% FPL.

The budget funds coverage to 158% FPL, which will reduce coverage by about 8,144 women per month (but because maternity coverage is for less than a full year, the total number of affected women in a year will actually be higher than this number, closer to 12,800). This represents a loss of about $110 million in reimbursement for Texas health care providers over the 2-year budget.

Emergency Medicaid. These numbers do NOT include the additional impact on coverage of deliveries by legal AND undocumented immigrant women under “Emergency Medicaid.” The income caps for full-service Medicaid are mirrored in Emergency coverage, so there will be more women affected and more uncompensated care for health care providers.

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Medicaid and CHIP in the 2004-05 Budget

Who is no longer eligible?Eliminate Medically Needy Spend-Down Program (Temporary Coverage for

Families with High Medical Bills): The Medically Needy "Spend-down" program gives full Medicaid benefits on a month-to-month basis to certain families with large medical bills. The program currently includes individuals in families with dependent children who have large medical bills that, when subtracted from earnings, reduce their income to 22%-31% of the poverty level ($395/month for a working parent with 2 children, or $275/month for a non-working parent of 2). The budget eliminates this coverage entirely, leaving a monthly average of 9,959 “Medically Needy” adults with dependent children in 2005 with no health coverage. As with maternity benefits, Medically Needy is temporary month-to-month coverage, so the total number of individuals affected by the program cut in a year will be much larger than the monthly average. (Update: Medically Needy spend-down may continue for maternity coverage--stay tuned!)

NOTE: Parents at TANF income level may still get Medicaid, even if they do not get TANF.

Emergency Medicaid. These numbers do NOT include the additional impact on coverage of legal AND undocumented immigrant women under “Emergency Medicaid.” The income caps for full-service Medicaid are mirrored in Emergency coverage, so there will be more individuals affected and more uncompensated care for health care providers.

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Medicaid and CHIP in the 2004-05 Budget

Who is no longer eligible?TANF Parents Lose Medicaid due to Work Sanctions• On September 1, over 60,000 parents and children (19,484

adults and 41,011 children) in TANF families lost all of their cash assistance benefits as a result of the new full-family sanction policy, and most of the adults in these families also lost their Medicaid (17,105). The state has estimated that 75% of the TANF recipients who will lose their cash assistance benefits over the next two years as a result of these changes are children. These are families who earn less than $190 per month, and who often face multiple barriers to employment.

• If disputed TWC rules are allowed to take effect, roughly 2,200 additional adults will lose their Medicaid benefits. TWC wants to be able to take the parent’s Medicaid away if they fall behind on a child’s immunizations or Texas Health Step check-ups, or if a child is truant. CPPP believes this would be a clear violation of federal law.

• Parents CAN “cure” their TANF sanctions and get their benefits restored. CPPP will be producing public education materials explaining how a client can regain TANF and/or Medicaid.

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Medicaid and CHIP in the 2004-05 BudgetService and Benefit Cuts:

Medicaid Community Care Hours of Service for Elderly Texans and Disabled Adults preserved for 2004, but Uncertain in 2005:

• HB 1 funding levels would have reduce the hours of support services for about 100,000 elderly or disabled Texans who now receive help to remain at home, rather than in a nursing home. Under the budget, almost all clients (i.e. all but about 1,800 of the fiscal 2003 enrollment of 101,500) would have hours of service cut by 15%.

• In August, state leaders announced that $36 million of the $167 million in restored GR would be used to avoid reducing hours of community care. Like the health care provider rate cuts, this policy change is made for 2004 only, and no promises are made for service levels in 2005. Funding in this program seems to be at least $100 million short in 2005.

Reductions in other Community and Long Term Care: The budget will reduce through attrition the number of Community Care-Medicaid Waiver enrollees to a specified cap, reducing the number of persons served by 3,452 (from current 2003 enrollment of 33,756, to fiscal 2005 enrollment of 30,304). Funds for DHS’ In-Home and Family Support program (2003 enrollment of 4,221 clients) were reduced by about 55%; stipend per client was cut from $3,600 to $1,200 to allow continued service to same number of clients. State-funded Long-Term Care will be reduced by 2,856 clients (non-Medicaid 2003 enrollment of 16,827 clients, versus 13,971 for fiscal 2005).

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Medicaid and CHIP in the 2004-05 Budget

Services Eliminated for Aged, Disabled, and Adult TANF recipients on Medicaid: There will no longer be coverage of licensed professional counselors, social workers, psychologists and licensed marriage and family therapists, podiatric and chiropractor care, eyeglasses, and hearing aids for adults on Medicaid, principally aged and disabled individuals. In May 2003 73% of adult Texas Medicaid clients were aged or disabled, about 625,000 out of 852,000 adults. (Cost to restore, per HHSC: $42.8 million)

Medicaid provider rate cuts: Most Medicaid providers will have rates cut. In August, state leaders announced that $131 million in federal Medicaid relief funds would reduce the SIZE of the cuts for 2004, but hospitals and doctors will see a rate cut of 2.5% instead of 5%; nursing homes 1.75% instead of 3.5%, and community care providers by 1.1% instead of 2.2%.

• In total dollars, the provider rate cuts were projected to cut payments to

providers by $1.05 billion over the 2004-2005 biennium; restoring half of that cut for just one year of the biennium therefore reduces the total cut by roughly one-quarter, for a total rate cut of more than $789 million.

• The lower cuts are funded for the year 2004 only — no guarantee is made for the second year of the biennium, and state officials reserve the right to impose the deeper cuts in 2005.

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Medicaid and CHIP in the 2004-05 Budget

Mandates HHSC to impose Medicaid cost-sharing to extent allowed under federal law. Lists options for cost sharing, including enrollment fees (not currently allowed or even "waivable" under federal law), deductibles, coinsurance, and premium sharing.

• It is expected that HHSC will now propose more extensive Medicaid co-payments than those proposed in rules in 2002 (but never implemented). It is not yet known whether HHSC will pursue options not allowed under current federal law).

• No rules have been proposed as of yet.

Reduces the personal needs allowance of Medicaid nursing home residents (the monthly amount that Medicaid nursing home residents may retain from the SSI, Social Security or other pension income, the remainder going to the nursing home) from $60 to $45.

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Medicaid and CHIP in the 2004-05 Budget

Estate Recovery from Medicaid Clients Using Long-Term Care Services. Requires Texas to implement a program of “estate recovery” from Medicaid clients using long-term care services (this would mean that in some circumstances, the state would seek reimbursement from the estate of a deceased recipient for the costs of Medicaid nursing home or community-based long term care). Creates an account for funds recovered, and provides for their re-appropriation for long-term care. Estate Recovery has been mandatory under federal law for a decade, but never implemented in Texas for political reasons. Federal law defines a number of situations in which estates must be exempted, and states have some latitude to define additional exemptions.

Medicaid Managed Care Statewide Expansion. HHSC must pursue managed care implementation if it is found to be cost-effective. Managed care models include HMO (including acute care portions of StarPlus), primary care case management (PCCM), pre-paid health plans, exclusive provider organizations, and “others.”

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Medicaid and CHIP in the 2004-05 Budget

Medicaid Prescription Drug benefits.   Supplemental Drug Rebates. HHSC must pursue supplement

rebates from drug manufacturers for drug provided by Medicaid, CHIP, and other state health programs (community mental health centers and mental hospitals specifically included). (All states receive rebates under federal Medicaid law, a number of states have negotiated additional rebates to increase their savings.)

  Preferred Drug Lists (PDL) for Medicaid and CHIP. Requires HHSC to establish a PDL favoring drugs for which supplemental rebates have been negotiated. A Pharmaceutical and Therapeutics Committee would be created to make recommendations about the contents of the PDL.

  Prior Authorization. HHSC must require prior authorization for drugs not on the PDL

  Pharmaceutical and Therapeutics Committee. This “P & T” Committee would be created to make recommendations about the contents of the PDL.

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Medicaid and CHIP in the 2004-05 Budget

Changes to Children’s Medicaid Simplification: Changes to children’s Medicaid simplification were built into the 2004-05 budget. These were:

(1) maintaining current 6-month continuous coverage (rather than phasing in a 12-month period mandated by SB 43 of the 2001 session),

(2) more rigorous verification of asset information (as opposed to imposing greater documentation demands on parents?)

(3) maintain access to mail and telephone application and renewal for most children, but DHS is given discretion to request in-person interviews in selected cases.

As such, there is reason to hope that the application and renewal process can continue to be relatively simple for most parents.

These changes are assumed to slow growth in children’s Medicaid enrollment to a very (unrealistically?) low rate.

• HHSC estimates these policy changes would reduce projected 2005 Medicaid enrollment by 332,198 children.

• In addition, the conference committee adopted House Medicaid caseload assumptions (which the House used to reduce Medicaid state General Revenue funding by $524 million), which actually assume child Medicaid caseloads even lower than those projected to result from the changes to Medicaid simplification.

• In sum, child Medicaid enrollment, projected in February 2003 to grow by 17.3% in 2004 and 8.4% in 2005, is now assumed to grow by only 2% and 1%.

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Changes to CHIP

Children’s Health Insurance Program (CHIP): • The budget keeps eligibility at 200% of the federal

poverty line (FPL), but adds a $5,000 asset limit to CHIP for families above 150% FPL and eliminates all income disregards.

• assumes policy changes to CHIP, which were built into HHSC’s budget request: (1) imposing a 90-day waiting period for enrollment, (2) reducing continuous eligibility to 6 months (from the current 12 months), and (3) requiring higher co-payments and premiums from clients.

• These changes, plus the impact of the asset test and removal of income disregards, are projected by HHSC to reduce the number of children enrolled by 169,295 below projected enrollment in 2005.  

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Changes to CHIPCHIP benefits are eliminated: • Dental services; Hospice Care Services; Skilled Nursing

Facilities; Tobacco Cessation programs; Vision benefit, including eyeglasses and exams; and Chiropractic services.

• Mental Health Restoration: Governor announced on October 20, 2003, that MH coverage will be restored to include 30 inpatient MH days, 30 outpatient visits, detox services, 30 days of inpatient drug treatment, and 30 outpatient substance abuse visits. – This will be added to the limited psychiatric benefits: 1 outpatient

diagnostic visit per enrollment period, 6 medication management visits per enrollment period, and Consultation in an inpatient or emergency setting after stabilization of an emergency condition.

– Federal CHIP authorities encouraged Texas to increase this benefit, as Texas would have set a precedent by eliminating MH coverage.

• There is a proposal to try to have Community MHMR authorities provide mental health services to CHIP children, using their existing funds to draw the CHIP federal match. However, this would likely only serve a very small subset of the CHIP children currently using MH services.

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Changes to CHIPChanges to Co-payments and Premiums:• Families below 100% Poverty: will now have $3 office visit co-pay, $10

hospital inpatient co-pay, 1.25%-of-income annual cap on co-pays (was $100). (NO premium, and E.R., and prescription drug co-pays stay the same.)

• Families between 101-150% FPL: $15 monthly premium for family (replaces $15 annual enrollment fee); office visit co-pay increased to $5; 1.25%-of-income annual cap on co-pays (was $100). (All other charges unchanged.)

• Families between 151-185% FPL: Monthly premium increased to $20; office visit co-pay increased to $7. (All other charges unchanged.)

• Families between 185-200% FPL: Monthly premium increased to $25. (All other charges unchanged.)

Asset Test for those above 150% of the Poverty Line:• Modeled after Texas Food Stamp Policy. • $5,000 “countable” limit, includes checking, savings, and countable vehicle

values.• Exempt $15,000 of “best” vehicle’s trade-in value; exempt $4,650 of each

additional vehicle value. A vehicle used for work (not just to get to and from work) MAY be exempted completely.

Six-Month Coverage Period: Renewal packets began to go out to families in month number 4 or 10 of coverage this month (9/03). All new enrollees after October 31, 2003, will have 6-month coverage.

Income Disregards Eliminated: No more earned income, child support paid/received, or child or adult day care cost deductions. State is reviewing this month, and families who seem to be over-income under new rules will receive denial notice, must respond promptly to retain coverage if income has changed.

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Changes to CHIP

HHSC Estimates of CHIP Enrollment:Impact of HB 1 and HB 2292

Projected Enrollment in 2005, before HB 2292 and HB 1

516,113

Projected Enrollment in 2005, after HB 2292 and HB 1

346,818

Difference 169,295 32.8%

June 2003 Enrollment 512,986

Difference (gap between current enrollment and projected 2005

enrollment)

166,168 32.4%

Average actual monthly enrollment in FY 2003

506,926

Difference (average 2003 enrollment and projected 2005 enrollment)

160,108 31.6%

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Other HHS Cuts

MHMR: Reductions in Community Services: • Community Mental Health client service levels at 2002-2003 levels • In-Home and Family Support for Mental Health is completely

eliminated, and about 2,946 mental health clients (based on current levels) will not receive services.

• Community Services for Mental Retardation are reduced. An 11% reduction will result in 2,570 fewer clients being served than in 2003 (leaving 20,797 who will be served).

• Funding for In-Home and Family Support for Mental Retardation was cut by 61%; and the agency decided to reduce each individual’s stipend by that amount (from $3,600 to $2,500) to be able to continue to serve about 4,200 clients per year.

• Medicaid service cuts for adults will hit MHMR Centers, as well as Family Violence, child protective services agencies, etc.

• Serious reductions in access to care for chronically mentally ill persons, as well as for those experiencing acute MH crises, seem likely to develop in the next 2 years.

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Other HHS CutsReduction of Community Mental Health Priority Population to 3

Disorders (HB 2292Section 2.75). • Law re-defines the priority population for Local MH Authorities’ services

to include only persons with schizophrenia, bipolar disorder, and/or major depression.

• Local MH Authorities must create jail diversion “disease management” programs for adults with major psychiatric disorders (bipolar disorder, schizophrenia, severe depression) and for children with serious emotional illness.

• This provision may mean that persons with other serious illnesses such as psychosis, non-suicidal depression, anxiety, autism, or personality disorders will no longer be served by the MHMRAs. According to the Mental Health Association in Texas, other diagnoses such as these accounted for over 12% of community center services in 2002, or services for over 16,890 persons out of about 139,000 served.

• Disease Management? Not defined in statue or rule. The intensity of services per client assumed varies dramatically depending on who you are talking to. Some MH advocates say funding for MH services is not enough to support full-fledged disease management. They are concerned that if MHMRAs are required to provide more intensive services to “first-come” clients with the 3 disorders, they will have to turn away other persons with the 3 diagnoses (schizophrenia, bipolar disorder, major depression), as well as clients with other disorders.

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Other HHS CutsTDH Programs funded below current service levels: • Several programs at the Texas Department of Health funded either

below 2002-03 levels, or simply at the same level, making no allowance for population growth or for inflation. However, client impacts are not easily quantified.

• The Kidney Health program was funded at the 2002-03 level, and may also use new co-payment proceeds; it appears that TDH will make service reductions but maintain service to the same number of clients.

• The County Indigent Health Care program is funded at $11.2 million; since the program paid out $7.2 million to counties in 2002 alone (2003 figures are not complete), it seems virtually certain that state funds for counties will not meet county demand in 2004 and 2005.

• Funding for HIV medications is below the level TDH indicated was needed to maintain the program at current service levels. However, the agency plans to modify clinical (not income) thresholds for receiving services in order to slow new client intake to meet reduced funding.

• Funding for Women and Children’s Health Services and Children with Special Health Care Needs are very close to 2002-03 levels, which means the programs do not have resources to deal with increased population demand or inflation,

• Much of Primary Health Care funding will be re-directed to fund start-up and expansion of Federally Qualified Health Centers, making those funds unavailable for direct services.

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Other Significant Issues Allows parents to opt out of immunizing their children

as a requirement of public school or day care attendance (HB 2292 Sections 2.160-2.164) based on either a physician’s statement that the immunization “poses a significant risk” to the child or a family member, or a parent’s statement of objection based on conscience or religious belief. This exemption is also available for attendance at day care facilities. The Commissioner of Health may declare situations of epidemic or emergency during which un-immunized children may be excluded from school or day care.

An official affidavit form for the parent or guardian will be developed, but the only record the state will have is of the number of forms mailed out. The state is expressly forbidden to maintain a record of the parents who have requested the affidavits. Because the state will have no record of which children are subject to opt-out affidavits, any such action taken by a Commissioner during an epidemic or other health emergency will essentially be on the “honor system.”

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Other Significant Issues Authorization of Government entities and Hospital

Districts to Provide Medical Care to Undocumented Immigrants (HB 2292 Sec. 2.70). Clarifies that local governments (including hospital districts) can provide non-emergency care to residents without regard for citizenship status, provided the services are locally funded. Says that persons who establish residency “solely” to obtain health care assistance are not considered residents. This provision removes any legal obstacle for Texas local governments choosing to provide comprehensive health care to undocumented residents. Montgomery, Nueces, and Tarrant County Hospital Districts have limited care to this population based on legal interpretation that federal law prohibited that care. With passage of this provision, there is no such federal prohibition. Districts may now choose to limit care, but there is no legal impediment to the provision of care.

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What’s Next?• $205 million GR in Medicaid Relief from Congress

remained available for reducing cuts AFTER the $167 million announced in August; other legislative actions taken in the 3rd Special Session (HB 2 and HB 28) have made a total of about $427 million available. (Read Policy Pages #197 and #200 for a detailed explanation.)

• Budget Act says (1) smaller provider rate cut and (2) restoring community care hours were TOP priorities for restoration, and these have been addressed for 2004. Other listed items include: HIV, STD and Community Health services at TDH; Medicaid coverage for Pregnant Women and Medically Needy and Graduate Medicaid Education payments at HHSC; state-funded community care at DHS; MR community services at MHMR; at-risk prevention services at PRS; and the Texas B-On-Time Loan higher education program.

• Bills in 3rd Special Session added Adult Medicaid benefit cuts, and CHIP mental health to the list.

• BUT, ultimately the Gov. & the LBB get to decide how to spend it. One option will be to instead implement ALL or MOST of the proposed cuts, and simply “bank” the funds in case there is a Medicaid shortfall in 2005.

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WHO decides?Governor Rick Perry (see http://www.governor.state.tx.us) Citizen's Opinion

Hotline: (800) 252-9600; Fax: (512) 463-1849; Office of the Governor, P.O. Box 12428, Austin, Texas 78711-2428

Lt. Gov. David Dewhurst (P.O. Box 12068, Austin, TX 78711)Speaker Tom Craddick, (P. O. Box 2910, Austin, TX 78768)Your Own Representative (P. O. Box 2910, Austin, TX 78768)and Senator (P.O. Box 12068, Austin, TX 78711)Other Members of the LBB: Senator Teel Bivins Representative Talmadge HeflinSenator Bill Ratliff Representative Ron WilsonSenator Chris Harris Representative Fred HillSenator John Whitmire Representative Vilma Luna Health and Human Service Chairs of Budget Committees:Senator Jane Nelson, HHS Workgroup Chair, Senate Finance CommitteeRepresentative Arlene Wohlgemuth, HHS Subcommittee Chair, House

Committee on Appropriations(see http://www.capitol.state.tx.us for more contact info)

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Tracking Impact of Changes• CPPP will soon have a web site at www.cppp.org to collect

information about the impact of state budget cuts and policy changes from the 78th Legislature.

• We are interested in hearing about the impact of budget decisions at all levels, from individuals to agencies to units of government. Social services agencies; advocacy organizations; schools; human service and health care providers; hospitals and clinics; school teachers; agency caseworkers; Medicaid, CHIP, TANF, or Food Stamps recipients; government officials and non-profit leaders; city or county governments; and any other affected individuals or groups are all encouraged to participate.

• If you have a personal story, a memo, or a report to share about how the new state budget has affected your life, your work, your organization, or your community please use the online form.

• WE HOPE to have this up and running no later than December 1, 2003.